Chinese electric vehicle (EV) companies are among my top growth picks. And there are several reasons for this. There is clearly a trend towards electrification — especially in China where the state is looking to take pollution outside city boundaries. But Chinese EV firms, which have sizeable indigenous markets, also trade with valuations that are just a fraction of their US peers.

So let’s take a look at two Chinese growth stocks.

NIO

NIO (NYSE:NIO) shares are down 49% over the past 12 months, but have risen from lows around $13 in May. What’s behind the volatility? The shares plummeted along with other growth stocks towards the end of 2021, and the downward track was extended by Chinese lockdowns which hurt production.

But this volatility belies a considerable potential. NIO is among the most technologically advanced EV makers in the world, delivering class-topping range, innovative battery tech and plenty of gadgets. It also has a wide range of models on sales.

Despite the positives, NIO trades with a price-to-sales (P/S) ratio far below its US peers. The stock’s ratio is 5.2, versus Tesla‘s 12.5, Lucid‘s 131 and Rivian‘s 38.

NIO is yet to make a profit and is unlikely to do so until 2024, but it has been on a Tesla-esque growth curve. The Shanghai-based firm doubled revenue in each of the years between 2018 and 2021.

2022 might be different, given the impact of lockdowns, but growth will be enhanced by the opening of its second factory. I am aware that this year’s disruptions may push back profitability, but I’ll await updates on that.

I already own NIO shares, but would buy more after the recent dip. For me, this stock is dirt-cheap and there’s huge growth potential in the EV market — Tesla’s market-cap is currently 30 times higher than NIO.

Li Auto

Li Auto (NASDAQ:LI) hasn’t experienced quite the same volatility as NIO over the past year. It’s down 7% over the 12 months, and 16% over the past month. The stock really gained earlier in the summer after Li launched its L9 model — a six-seater, full-size flagship SUV — but has subsequently fallen.

There are several reasons for the recent dip (NIO experienced it too). These include concerns about Chinese and global economic growth, but also power outages. Li actually started delivering the L9 as the power crisis heated up.

But there are plenty of positives to look at with Li. Firstly, it’s cheap like NIO, with a P/S ratio of just five.

It’s L9 — which was long awaited — also looks set to really disrupt the EV market. The $70,000 SUV comes with two electric engines and one petrol, providing 1,100km of range. Equipped with sizeable infotainment displays, passengers can easily control displays via 3DToF hand/finger tracking cameras.

The growth curve is also impressive, with 140% year on year revenue growth registered in the last quarter. Li only has two models at the moment, and that could hold it back. But, in the long run, I’m bullish on Li. I don’t own this stock but would buy it today.

So let’s take a closer look at these stocks and see whether now is a good time for me to buy.

Chinese EVs

Li Auto stock soared in May and June as Covid-19 restrictions were reduced. The firm also announced the long-awaited launch of its L9 model — a six-seater, full-size flagship SUV. Li claims that the SUV is the best family SUV available for less than $750,000. That’s a very bold claim when you consider the L9 only costs $70,000.

NIO is probably my favourite Chinese EV stock. The company has a broad range of models on offer, which will help revenue growth. It’s been on a Tesla-esque growth curve in recent years and I think its technology could be a real winner in the years to come. It’s battery-swapping tech allows drivers to change empty batteries for full ones at NIO charging stations in just a matter of minutes. NIO is also looking to open a second factory this year, but unlike its peers, it’s not the owner of its factories.

Xpeng offers a cheaper range of vehicles than its peers. But its delivery volume is the highest. Xpeng reported 34,422 EV deliveries during the second quarter of 2022 and topped the list of related Chinese brands for the fourth consecutive quarter. XPeng is also taking on Tesla in Europe and is undercutting the US brand with its P5, which is being sold for around $57,000.

Is now the time to buy?

One issue is that I can only buy these stocks through their US listings at the moment. And with the pound weak, now isn’t the best time to buy dollar-denominated stocks. Eventually, I believe that the pound will get stronger and therefore currency appreciation could wipe out my gains.

However, I see Chinese EV stocks as having big growth potential and therefore I’m willing to overlook my concerns about the currency.

I also believe that now looks like a good time to buy. In all honesty, there isn’t a massive amount between these three companies in terms of valuation. They all trade with cheap price-to-sales (P/S) ratios (Xpeng 4.9, NIO six, Li Auto eight).

Xpeng is down 40% over the past 12 months, while NIO is down 47%. Li Auto is the only manufacturer up (7%) on this time last year.

I do have some concerns about the impact of slowing economic growth globally, and more Chinese lockdowns, on sales, but I see that as already being priced in. Chinese growth concerns are one of the reasons why these three companies have P/S ratios that are just a fraction of Rivian (222) and Lucid (160).

While I’m positive on all three companies, my personal favourite in NIO. I think the brand offers something really unique and I think the swappable batteries will be a big plus in the years to come.

While they all differ, there’s a common theme. They’re cheap compared to their US counterparts by the price-to-sales (P/S) ratio.

So let’s have a close look at these three companies and see which one is right for my portfolio.

NIO

Ok, I already own NIO stock. In fact, I bought when the share price dipped to $13. But it’s now trading at over $20 a share, still down 55% over 12 months.

Despite the recent gains, I still see $20 as a good buy opportunity. NIO has been on an impressive growth curve, comparable to Tesla, and it owns market-leading technology.

Its battery-swapping technology is a real winner for me, allowing drivers to change empty batteries for full at NIO charging stations in just a matter of minutes.

The company also uses larger batteries than Tesla, giving some models a greater range than their American counterpart.

NIO hopes to turn a profit for the first time in 2024 and will open its second factory later this year.

Collective concerns here include the impact of more Chinese lockdowns, the health of the Chinese economy, and access of these EV manufacturers to lucrative Western markets.

Li Auto

Li Auto stocks soared in May and June as Covid-19 restricted were dialled back and the company announced the long-awaited launch of its L9 model — a six-seater, full-size flagship SUV.

The firm contends that Li’s L9 is the best family SUV on the market for less than $750,000. That’s a bold statement, but even bolder when you consider the L9 only costs $70,000.

Lockdowns saw the share price fall and would have represented a great buying opportunity. April deliveries fell to less than 5,000 amid Covid-19 restrictions.

But production has recovered and Li is also on an impressive growth curve. Revenue for the quarter ending 31 March was $1.5bn, an impressive 307.89% increase year-on-year. 

Despite the positivity around Li Auto, it’s a little more expensive than its Chinese peers. Both NIO and XPeng have more models too. I wouldn’t buy Li now.

XPeng

XPeng offers a cheaper range of vehicles than its peers and its delivery volume is the highest.

In June, Xpeng delivered 15,295 Smart EV, representing a 133% increase year-on-year. The company reported 34,422 EV deliveries during Q2, meaning it topped the list of related Chinese brands for the fourth consecutive quarter.

I actually think its cheaper range makes it a potential winner amid the predicted global economic downturn. A slowdown in growth is also expected in China amid a banking and property crisis.

XPeng’s P5 is being sold in Europe for around $57,000. It’s not cheap, but its primary competitor, the Tesla Model 3, costs $62,560 on the continent. Naturally, it’s a lot cheaper in China, which should aid Chinese consumer sales.

XPeng has been on an impressive growth curve, has a wide range of models at cheaper price tags. Because of this, and it’s attractive valuation, XPeng stock is a buy for my portfolio.

The Nasdaq, which is heavy on growth and tech stocks, saw some pretty steep declines. But, so did other indexes, including the NYSE. For me, this dip represents an opportunity to buy.

So here are some growth stocks on the US index that I’m looking to add to my portfolio. 

Taiwan Semiconductor Manufacturing Co 

The undisputed king of semiconductor manufacturing is trading 7% lower following the June sell-off. While listed on the NYSE, it was clearly impacted by the Nasdaq rout.

Taiwan Semiconductor Manufacturing (NYSE:TSM) is a hugely profitable growth stock and the company registered record revenue in Q1.

It has a price-to-earnings (P/E) ratio of around 19, which is cheaper than the industry average. Investors have likely factored in TSM’s risky and aggressive growth strategy. 

There’s also some geopolitical risk. China has reiterated its desire to bring Taiwan back under the control of the mainland. 

Despite this, TSM is the leading chip manufacturer both in terms of output and technology. 

Li Auto

Li Auto (NASDAQ:LI) shares, like other Chinese EV manufacturers, have done pretty well over the past month. This is largely because of the Chinese economy appearing more open than it did at the beginning of May. But Chinese growth stocks also received a boost after an apparent government U-turn on indigenous soft tech. 

However, there’s a lot of volatility. Shares in Li Auto and peer NIO have jumped up and down over the past two weeks. And this creates opportunity. I want to buy Li Auto for the long run, but I’m watching the share price for an opportunity to buy. 

The firm is on an impressive growth curve. Li Auto revenue for the quarter ending 31 March was $1.5bn, an impressive 307.89% increase year-on-year. 

Lockdowns could hurt production but, in the long run, I think this Chinese manufacturer will prosper. 

CRISPR Therapeutics

CRISPR Therapeutics (NASDAQ:CRSP) has actually done rather well over the past month, but I still think there’ll be a good opportunity to buy amid the current volatility. Investment expert Cathie Wood has actually bought shares multiple times for her Ark Invest (NYSEMKT:ARKK) portfolio. 

It’s definitely a speculative pick as governments and regulators around the world have been hesitant to back gene therapy treatments. However, the technology certainly has plenty of uses. CRISPR Therapeutics plans on submitting its candidate treatment for blood disorders for regulatory approval at the end of this year. 

The gene editing treatment could be used to treat numerous diseases in the future. Scientists have been working to engineer immune cells to seek and destroy cancer cells.

Despite the recent market volatility, I’ve been fairly fortunate. I had become sceptical about the valuations of some tech stocks and had minimal exposure to them within my portfolio. But having seen tech stocks plummet over the past six months, means some are starting to look a lot more attractive. The electric vehicle (EV) sector is one area I’ve been looking at more closely, as I see the industry’s growth as inevitable. So here are four EV-related growth stocks I’m considering for my portfolio.

NIO

NIO (NYSE:NIO) has a market cap of $20bn. Now that might sound like a lot, especially when you realise its three times larger than British engineering giant Rolls-Royce. But it’s only a fraction of the valuation afforded to Tesla (NASDAQ:TSLA), which surpassed a $1trn valuation last year before its recent fall. The Shanghai-based firm has demonstrated impressive revenue growth, moving from $719m in revenue in 2018, to $5,6bn in 2021. Over the period, car sales rose from 8,101 to 91,429.

From watching endless car review videos, it seems that NIO has a very competitive offering in the sector. It also employs an ingenious system that allows car owners to quickly swap batteries at NIO stations — in three minutes — rather than the conventional recharging method. I think NIO could be a big winner. However, the current Chinese lockdowns are likely to stunt growth in 2022.

Li Auto

Li Auto (NASDAQ:LI) is another Chinese EV company that could be set to boom. The firm has boosted R&D spending this year, using up 42% of its budget in the first quarter alone. Li Auto is expected to deliver its L9 model in the third quarter of 2022. The long-awaited PHEV SUV could turbocharge the brand’s fortunes in an increasingly competitive environment. Li Auto performed in line with expectation in Q1, delivering nearly 32,000 Li Ones — its first vehicle. However, April deliveries fell to less than 5,000 as lockdowns hit China. Therefore the Q2 forecast of 21,000-24,000 may be a little optimistic. In general, I’d favour NIO over Li Auto.

Blink Charging

Blink Charging (NASDAQ:BLNK) operates over 30,000 EV charging stations in 16 countries, although primarily across the US. The firm recently announced positive results, with losses narrowing and revenue growing substantially. Revenue grew 339% to $9.8m in Q1 versus the same period last year. The firm has demonstrated impressive growth over the past two years and the number of Blink Charging stations has more than doubled over the last 12 months. I think it could well be a big winner, although as a relatively small company, its share price could be swayed by large trades and market volatility in the near term.

Tesla

I’ve been looking at Tesla again after its share price collapsed in April. However, I’m still not convinced. It’s the world’s most valuable car company but that’s based on massive growth projections. Tesla reported revenues of just $53.8bn in its record-breaking 2021, with adjusted EBITDA of $11.6bn and net income of $5.5bn. I’m concerned about competition, not only from companies like NIO, but established brands as they enhance their EV offerings. I’m still passing on Tesla.